Abbott's Audit razor gang look to make savage cuts

The Abbott government's Commission of Audit must find savings that will build to a record $26 billion budget surplus within a decade, more than $10 billion higher than anything John Howard and Peter Costello ever achieved.

The exact dollar figure of what the government's razor gang has in its sights emerged at a parliamentary inquiry into the Audit.

Treasury official told senators that forecasts supplied to the Audit showed gross domestic product growing to $2.3 trillion by 2023-24, up from $1.57 trillion this year.

The Audit, led by Business Council of Australia president Tony Shepherd, has been tasked with identifying savings that will return the budget to sustainable surpluses that will rise to the equivalent of 1 per cent of GDP by 2023-24.

That translates to a record $26 billion surplus that year. The Howard government's biggest surplus was $17.8 billion in 2006-07.

Treasurer Joe Hockey's December budget update showed a deficit of $47 billion in the current year and deficits out to 2023-24.

National debt is predicted to top $667 billion that year.

Labor and the union movement have warned that Mr Hockey and Prime Minister Tony Abbott will need to find savage cuts in their first budget in May to make their plan to return to surplus a reality.

Labor senator Sam Dastyari said: ''For the first time we've seen just how savage these cuts are going to be. It's unfathomable why this government is intent on reaching an arbitrary, record surplus.''

Mr Hockey said on Tuesday that he intended to adopt the majority of the Commission of Audit's recommendations. It is expected to recommend a mixture of privatisations, the consolidation of government departments, outsourcing public services to the private sector and a restructure of the public service.

Nigel Ray, executive director of Treasury's fiscal group, was asked what would be the result of allowing budget deficits to continue unchecked.

''In the long run it will not be sustainable, quite clearly,'' he said.

In Canberra, former Victorian premier John Brumby called on the commission to consider cash handouts to bribe state governments to cut costs.

As head of the Council of Australian Governments Reform Council, Mr Brumby oversaw the disbursal of $264 million in ''reward payments'' to states that harmonised regulations. He said of the 26 projects subject to reward payments, 21 had been completed. Of the 19 which were not eligible for payments, only 10 had been completed.

"We could safely draw the conclusion that if you want to accelerate reforms, reward payments certainly provide the encouragement and the incentive for the more rapid completion of reforms than would otherwise be the case," he said.

If all of the commission's 42 targets were achieved the economic benefits would amount to $6 billion, close to half of 1 per cent of GDP.

This story Abbott's Audit razor gang look to make savage cuts first appeared on The Sydney Morning Herald.